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Quality of Regulation in Brazil: Electricity and Oil & Gas Sectors

Quality of Regulation in Brazil: Electricity and Oil & Gas Sectors. Eduardo Machado Technological Research Institute New Dehli , March 27 th 2010. 1. Brazilian regulation in historical perspective. From the entrepreneurial state to the regulatory state. 1980-90. 1930. 1996. 2005.

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Quality of Regulation in Brazil: Electricity and Oil & Gas Sectors

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  1. Quality of Regulation in Brazil: Electricity and Oil & Gas Sectors Eduardo Machado Technological Research Institute New Dehli, March 27th 2010

  2. 1. Brazilian regulation in historical perspective

  3. From the entrepreneurial state to the regulatory state 1980-90 1930 1996 2005 Entrepreneurial state Transition to an open economy Regulatory State

  4. Regulatory agencies were established after the second half of the nineties… 2002 1996 1997 1999 2000 ANEEL (Electricity) ANATEL (Telecom) ANP (Petroleum and Natural Gas) ANVISA (Sanitary Control) ANS (Health Plans) ANA (Water Resources) ANTT (Ground Transports) ANTAQ (Water Transports)

  5. Brazil had the wrong sequence in some sectors…

  6. 2. Regulatory framework in selected sectors

  7. Agencies respond to different types of market failure...

  8. Three groups of regulated infra-structure markets • Regulatory framework exists, there are policy issues: telecommunications, electricity and civil aviation. • Regulatory framework exists but it is inadequate: petroleum, railways, roads and ports • No regulatory framework: natural gas, water and sanitation

  9. State intervention and legal uncertainty in selected sectors… Sector Degree of State Intervention Level of Legal Uncertainty Generation Transmission Processing Transport Distribution Commercialization Electricity XX XX X - XX Petroleum XXX XXX XX X XX Natural Gas XX XXX XX XX XXX

  10. Regulatory Change in Petroleum Industry

  11. Electricity Sector Pre and Post Reform

  12. 3. Regulation Quality: Results

  13. Diffferents studies show that... SECTORIAL PERFORMANCE INDEX Source: Author s

  14. ...reforms do not improve... World Governance Indicators Source: Kauffaman & Kraay (2009)

  15. ...quality of regulation! Regulatory Governance Index Source: Correa et al. (2006)

  16. 4. Conclusion

  17. Electricity has been a failure… • Supply crisis in 2001 and 2009 • Recent model does not provide stability • Centralizes decisions in the Executive Power • More investments are required to avoid a possible supply crisis

  18. Petrobrás” does not allow enough competition and entry… • State-owned company controls over 90% of the exploration, transportation and distribution segments • Petrobrás’ price policy is not transparent • Lack of access to transportation and distribution networks hinders new entry and investment

  19. The natural gas sector lacks a specific regulatory framework… • Recent discovery increased the importance of natural gas • Need for a specific regulatory framework: • Need for clear rules for access to transportation and distribution networks • Federal and subnational governments have to coordinate

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